### United States

Department of Agriculture Anim al and Plant Health Inspection Service December 201 2 **Initial Regulatory Flexibility Analysis**

**Proposed Rule APHIS**  **- 2011**  **- 0060**  **RIN 0579 -**  **AD59 Importation of Fresh**  **Citrus Fruit**  **from Uruguay**  **, including Citrus Hybrids and**  **Fortunella spp., into the Continental United**  **States**

Policy & Program Development Policy Analysis & Developmenti



### Summary The proposed rule is in response to a request from the n ational plant protection organization of Uruguay for USDA authorization to allow the importation of specified fresh citrus varieties into the continental United States. U.S. entities that may be impacted by

imports of fresh citrus from Uruguay are producers and packers of fresh oranges, lemons, tangerines , and mandarin varieties. F resh oranges ( including N avel, Valencia, Temple and other varieties ) are produced in California ( 87 percent), Florida (11 percent), and Texas ( 2 percent). L emons are produced in California ( 97 percent) and Arizona ( 3 percent) . Tangerines and mandarins (including tangelos and tangors) are produced in California ( 76 percent) , Florida ( 23 percent) , and Arizona (less than 1 percent) . Louisiana commerciall y produces a variety of Satsuma that is mostly sold locally
. Impa cts of the proposed rule on U.S. entities would be depend ent up on the quantity of fresh citrus imported from Uruguay and the substitutability

of these fresh citrus varieties for U.S.
- grown citrus varieties. H istorically , Uruguay has produced less than 3 p ercent of total U.S. citrus production, including processed citrus, and total exports of fresh citrus from Uruguay to world market s have been equivalent to less than 3 percent of the combined U.S. production of fresh orange, lemon, tangerine and mandarin v arieties
. We anticipate that exports directed to the U.S. domestic market would be a small fraction of Uruguay ’s total exports of these fresh citrus fruits based on availability and currently established export markets in Europe and Russia
. G iven the sma ll quantity

expected to be imported from Uruguay , it is very unlikely that there would be a significant impact on the U.S. markets for fresh oranges, lemons, tangerines and mandarin varieties
. Given the sizable amounts of fresh lemons and mandarins, for e xample, imported by

the United States and the fact that the time of y ear that citrus is produced inii

Uruguay is the same as that for current South American sources , we expect that any product displacement that may

occur because of the proposed rule would be largel y borne b y other foreign suppliers of fresh citrus
. The majority

of citrus producers and packinghouses are considered small entities. APHI S welcomes informed public comment in order to better determin e the extent to which U.S. small entities may be affected b y this proposed rule
.

### Table of Contents

Summary
................................ ................................ ................................ .............................. i Introduction
................................ ................................ ................................ ......................... 1 Initial Regulatory

Flexibi lity

Anal ys is
................................ ................................ ................ 1 Reasons Action is Being Considered
................................ ................................ .............. 1 Objectives of and Legal Basis for the Rule
................................ ................................ .... 2 Potentially

Affected Small Entities
................................ ................................ ................. 3 Citrus Production and Trade
................................ ................................ ....................... 4 Prevalence of Small Entities
................................ ................................ ....................... 8 Projected Reporting, Recordkeeping, and Other Compliance Requirements
............... 11 Duplication, Overlap, or Conflict with Existing Rules and Regulations
...................... 11 Alternatives to minimize Significant Economic Impacts of the Rule
........................... 121



### Intro **d uction**  Uruguay has requested USDA authorization of market access for commercial shipments of its fresh citrus into the continental United States. In response to this request, the APHI S division of Plant Protection and Quarantine (APHIS PPQ) has evaluated a pest risk assessment (PRA) and a risk management anal ys is (RMA), and is proposing to allow the importation of commercial shipments of fresh citrus from Uruguay. The purpose of the proposed rule is to amend the current regulations to allow the importation of specified commercial fresh citrus varieties into the continental United States under specified conditions o f entry to protect against the introduction of quarantine pests. Section 319.56
- 1 of Title 7 of the Code of Federal Regulations grants the regulatory authority for imposing phy

tosanitary requirements on the importation of fruits and vegetables from foreign suppliers into the United States. As required b y the Regulatory Flexibility Act, we present the initial regulatory flexibility anal ys is in which the potential effects of the proposed rule on small businesses, small organizations and small governmental jurisdictions are evaluated. 

### Initial Regulatory Flexibility Analysis The Regulatory

Flexibility

Act requires agencies to evaluate the potential effects of their proposed and final rules on small businesses, small organizations and small governmental juri sdictions. Section 603 of the Act requires agencies to prepare and make available for public comment an initial regulatory flexibility

analy sis that describes expected impacts of a proposed rule on small entities. **Reasons Action is Being Considered** The national plant protection organization (NPPO) of Uruguay has requested USDA authorization to allow the importation into the continental United States of sweet oranges, 42

species of mandarins, c itrus hy brids, and 2 species of the c itrus
- related genus Fortunel la
. In response to this request, APHI S Plant Protection and Quarantine conducted an assessment of the plant pest risks associated with the importation of these fresh fruits from Uruguay into the continental United States. 1 APHI S has determined that the c urrent prohibition on the ir importation is unnecessary . Any risks posed to U.S. agriculture b y entry of th e se commodities would be successfully

mitigated by a sy stems approach designed to prevent a number of pests, including fruit flies, from following th e pathway
. The sy stems approach includes provisions for registration of production areas and packinghouses, orchard sanitation, fruit fly trapping, treatment and inspection, and a ph yt osanitary certificate with an additional declaration certifying the commercial shipment is free from all quarantine pests and has been produced in accordance with the sy stems approach. **Objectives of**  **and Legal Basis for the Rule** The objective of the proposed rule is to amend the current regulations under Title 7 § 319.56 of the Code of Federal Regulations (CFR) to allow the importation of fresh citrus fruit from Uruguay , including citrus hy brids and Fortunella spp., into the c ontinental United States. This section of the CFR grants regulatory authority for setting phy

tosanitary requirements for the importation of fruits and vegetables into the United States. The Plant Protection Act (Public Law 106
- 224, June 20, 2000) is the statutory basis for 7 CFR 305 and 319. It authorizes the Secretary of Agriculture to implement programs and policies designed to prevent the introduction and spread of plant pests and diseases.

1 USDA APHIS PPQ CPHST, “Importation of Fresh Citrus Fruit, including Sweet Orange ( Citrus sinensis (L .) Osb.), Lemon ( C. limon (L.) Burm .), Mandarin ( C. reticulata Blanco, C. clementina Hort. ex Tan., C. deliciosa Ten., C. unshiu (Mak.) Marc.), Citrus Hy brids, and the Ci trus - Related Genus Fortunella (F. japonica Thunb. , F. margarita (Lour.) Swing.), from Uruguay into the Continental United States,” February 2011.3

**Potentially Affected Smal**  **l Entities** The United States commerciall y produces oranges, lemons and specialt y m andarin varieties of Citrus reticulata , such as tangerines and Satsuma mandarins. F resh oranges, including N avel, Valencia, Temple and other varieties, are produced in California (8 7 percent), Florida (11 percent), and Texas ( 2 percent). L emons are produced in California ( 97 percent) and Arizona ( 3 percent) . Tangerines and mandarins (including tangelos and tangors) are produced in California ( 76 percent) , Florida ( 23 percent) , and Arizona (less than 1 percent) . Louisiana commerciall y produces a variet y of Satsuma that is mostly sold locall y. Effects of the proposed rule on U.S. entities would depend on (1) the quantity of fresh citrus imported from Uruguay supplied to the continental United States, and (2) the substitutability

of these fresh citrus varieties in the continental United States f or similar c itrus varieties. While the possibility

of substitution of fresh citrus varieties imported from Uruguay for U.S.
- grown citrus varieties exists , we anticipate any price effects would be negligible
. We believe that the proposed rule would have little effec t for U.S. producers of fresh orange, lemon, tangerine, and mandarin varieties, given that, historically, total exports of fresh citrus from Uruguay to world market s have been equivalent to less than 3 percent of U.S. production of fresh oranges, lemons, t angerines and mandarins. W e present here data on U.S. fresh orange, lemon , tangerine and mandarin production and trade , before describing potentiall y affected small entities
.4

**Citrus Production	and	Trade**  Fresh Oranges The United States is traditionally a net exporter of fresh oranges . U.S. fresh orange production, net imports, and domestic suppl y , 2005
- 06 to 2010
- 11, are shown in t able 1
. In the 201 1
- 12 season , 2 the United States imported 263 million pounds of fresh oranges, primarily from Chile ( 42 per cent), South Africa ( 3 3 percent), Mexico (12.8 percent), and Australia ( 9.5 percent)
. During the same season , the United States exported approximately 1, 542.5 million pounds of fresh oranges . South Korea was the largest importer of U.S. fresh oranges , 3 a ccounting for approximately 26 percent of U.S. exports , followed by Canada ( 20 percent), Japan (15 percent), Hong Kong ( 1 2 percent), and China (7 percent)
. 4 Table 1. U.S. Fresh Orange Production , Net Import s , and Domestic Supply, Seasons 2005
- 06 through 20 10
- 11 Season Production a Net Imports b Domestic Supply

c

------------ thousand pounds
------------ 2005
- 06 4,104.0 (1,039.8) 3,064.2 2006
- 07 2,754.0 (501.3) 2,252.7 2007
- 08 4,208.0 (1,181.3) 3,026.7 2008
- 09 3,674.0 (888.6) 2,785.4 2009
- 10 4, 242 .0 (1,2 38.8 ) 3 , 003.2 2010
- 11 4 , 538.0 (1 , 452.5) 3 , 085.5 Source: USDA Economic Research Service
. a Excludes processed fruit. b Net imports equals imports minus exports c U.S. production (excluding processed utilization) plus net imports.

2 Season is year ending July 31 st

. 3 Surpassing Canada as the leading importer of fresh oranges. 4 U.S. Census Bureau, as reported by Global Trade Information Services, Inc.5

About 70 percent of U.S. fresh orange production was consumed domestically in the 2011
- 12 season
. 5 While fresh utilization of oranges accounts for onl y 4 percent of total orange production in Florida, f

resh utilization of California and Texas production accounts, on average , for 82 and 87 percent , respectivel y, of total production each season
. 6 U.S. grower revenue from fresh orange production in 2011
- 12 was approximately $ 860.9 million. 7 Imports average approximately 5 percent of domestic supply each season. According to 2 007 Census of Agriculture data, there were a total of 1 2, 116 orange production operations in the United States in 2007 , of which 11 , 573 were located within the continental United States. 8 The remaining 543 orange producing operations were located in Hawai i. Fresh Lemons The United States is also a net exporter of fresh lemons. U.S. fresh lemon production, net imports, and domestic suppl y are shown in t able 2
. In the 2011
- 12 season , the United States imported 126.6 million pounds of fresh lemons , with n early 60 percent supplied by Mexico and 35 percent from Chile. T hat same season , the United States exported approximately 201.5 million pounds of fresh lemons. Japan and Canada are the largest importers of U.S. fresh lemons, accounting for approximately 40.3 and 32.5 percent of U.S. exports, respectivel y. 9

5 The proportion of U.S. fresh orange production consumed domestically is the ratio of utilized fresh production less exports divided by utilized fresh production
. Data Source: USDA ERS Brief ing Room, Fruit and Tree Nut Yearbook, 2010. 6 Fresh utilization refers to the proportion of total fruit sold and/or consumed as fresh citrus. The remainder is considered to be utilized on the processed market. 7 National Agricultural Statistics Service (NASS), USDA, “Citrus Fruits 201 2 Summary,” September 201 2
. 8 The number of orange farms in the United States, as reported by the 2007 Census of Agriculture , includes operations that produced oranges for processed utilization ; in Florida, the majority of or anges are processed
. 9 U.S. Census Bureau, as reported by Global Trade Information Services, Inc.6

Table 2 . U.S. Fresh Lemon Production , Net Import s , and Domestic Supply, Seasons 2005
- 06 through 20 1 0
- 1 1 Season Production a Net Imports b Domestic Supply

c

------------ million pounds
------------ 2005
- 06 1,372.1 ( 137.7) 1,234.4 2006
- 07 980.0 (136.1) 843.9 2007
- 08 789.0 (192.1) 596.9 2008
- 09 1,065.1 (108.0) 957.0 2009
- 10 9 68.0 (106.6) 861.4 2010
- 11 1,202.0 (125.2) 1076.8 2011
- 12 1,310.0 (74.9) 1,235.1 Data Source: USDA ERS Briefing Room, Fruit and Tree Nut Yearbook, 2010. a Excludes processed fruit. b Net imports equals imports minus exports c U.S. production (excluding processed utilization) plus net imports. About 89 percent of U.S. fresh lemon production was consum ed domestically in 2010
. 10 U.S. imports of fresh lemons serve to supplement domestic production to meet domestic demand. Fresh utilization of U.S. lemon production accounts, on average, for 58 percent of total production each season with the remaining fruit being processed
. U. S. grower revenue from fresh lemon production in 2009
- 10 was approximately $380.6 million. 11 Imports average approximately

10 percent of domestic supply each season. According to 2007 Census of Agriculture data, there were a total of 2,607 lemon operations in the United States in 2007 , of which 2,201 were located within the continental United States. 12 The remaining 406 lemon operations were located in Hawaii.

10 The proportion of U.S. fresh lemon production consumed domestically is the ratio of utilized fresh production less exports divided utilized fresh productio n . Data Source: USDA ERS Briefing Room, Fruit and Tree Nut Yearbook, 2010. 11 National Agricultural Statistics Service (NASS), USDA, “Citrus Fruits 2010 Summary,” September 2010
. 12 The number of lemon farms in the United States, as reported by the 2007 Ce nsus of Agriculture , includes operations that produced lemons for process ing
.7

Tangerines and Mandarins The United States is a net importer of mandarins (including Satsumas and tangerines), Clementine s and other citrus hy brids. U.S. tangerine production, net imports, and domestic suppl y are shown in t able 3
. In2010, the United States imported 265.9 million pounds of mandarins (including Satsumas and tangerines), Clementine s , and other citrus hy brids with approximately

38 percent, 2 4 percent, 1 3 percent, and 10 percent arriving from Spain, Chile, Morocco, and Peru, respectivel y. T hat same ye ar, the United States exported approximately 7 6.2 million pounds of mandarins (inclu ding Satsumas and tangerines). Canada is the largest importer of U.S. fresh mandarins, accounting for 67 percent of U.S. exports. The second largest importer of U.S. mandarin varieties is Japan, accounting for approximately 20 percent. 13 About 77 percent of U.S. fresh mandarin production was consum ed domestically in 2010. 14 The United States relies on imports of tangerines and mandarins to supplement domestic production in satisfying domestic demand. U.S. mandarin and tangerine production is primarily
s old as fresh fruit with f

resh utilization account ing , on average, for 76 percent of the total production. U.S. grower revenue from fresh tangerine production in 2009
- 10 was approximately $268.4 million. 15 Imports average approximately 25 percent of dome stic supply each season.

Table 3 . U.S. Fresh Tangerine Production , Net Import s , and Domestic Supply , Seasons 2005
- 06 through 2009
- 10 Season Production a Net Imports Domestic Supply

b

------------ million pounds
------------ 2005
- 06 622.0 181.5 803.5

13 U.S. Census Bureau, as reported by Global Trade Information Services, Inc. 14 The proportion of U.S. fresh mandarin production consumed domestically i s the ratio of utilized fr esh production less exports div i ded by utilized fresh production . Data Source: Foreign Agricultural Service, Production, Supply, and Distribution Online. 15 National Agricultural Statistics Service (NASS), USDA, “Citrus Fruits 2010 Summary,” September 201 0
.8

2006
- 07 540.0 232.4 772.4 2007
- 08 796.0 144.4 940.0 2008
- 09 746.0 221.9 967.9 2009
- 10 959.3 192.8 1,152.2 Data Source: USDA ERS Briefing Room, Fruit and Tree Nut Yearbook, 2010. a Excludes processed fruit. b Net imports equals imports minus exports
. c U.S. production (excluding processed utilization) plus net imports. According to 2007 Census of Agriculture data, there were a total of 1,976 tangerine operations in the United States in 2007 , of which 1,676 were located within the continental United Stat es. 16 The remaining 300 tangerine operations were located in Hawaii **. P**  **revalence	of	Small Entities**  The proposed rule may

affect domestic producers of fresh citrus , as well as firms responsible for packing and shipping these commodities to domestic and f oreign markets. C itrus producers that may

be affected are expected to be small, based on 2007 Census of Agriculture data and Small Business Administration ( SBA ) small
- entity standards for entities cla ssified within the farm categories of Orange Groves (NA ICS 111310) and Citrus (except Orange) Groves (NAICS 111320). SBA classifies producers in th ese categories with total annual sales of not more than $750,000 as small entities. APHI S does not have information on the size distribution of U.S. citrus produc ers, but according to 2007 Census of Agriculture , there were a total of 98,281 Fruit and Tree Nut farms (NAICS 1113) in the United States in 2007. 17 Of this number, nearl y 94 percent had annual

16 The number of tangerine farms in the United States, as reported by the 2007 C ensus of Agriculture , includes operations that produced tangerines for process ing
. 17 This number includes farms producing citrus and those specifically producing lemons.9

sales in 2007 of less than $500,000, which is well below the S BA’s small
- entity threshold of $750,000. 18 According to the 2007 Census of Agriculture Summary and State Data report, that y ear there were a total of 15,658 citrus farms in the United States . We describe the prevalence of small farms among citrus produc ers using the example of U.S. lemon production. In 2007 , there were 2,607 lemon farms (79 percent in California and Arizona , and the remaining in Florida, Hawaii, Louisiana, and Texas )
. 19 T here is little evidence to suggest that many of these producers op erate on a large scale. For example, there were 49 lemon farms in Florida, according to the 2002 Census of Agriculture
. 20 During that same ye ar, Florida reported the total value of Florida lemons at approximately

$2.1 million, with bearing acreage estimat ed at 800 acres , yielding average revenues per farm of less than $43,000

. 21 (T he Florida Agricultural Statistic Service discontinued lemon estimates after the 2002
- 03 season; however, the 2007 Census of Agriculture Summary and State Data report indicates a 22 percent increase in lemon farms from the 2002 to the 2007 Census of Agriculture
. ) While cash receipts by

size for lemon farms were not reported in the 2007 Census of Agriculture , it is reasonable to assume that most of the 2,607 domestic lemon farms qu alify as small entities. This conclusion holds as well for the producers of the other citrus species and varieties. In the case of packinghouses, establishments engaged in Postharvest Crop Activities (NAICS 115114) are also predominantly small. The SBA small
- entit y standard for

18 Source: SBA and 2007 Census of Agriculture
. 19 National Agricultural Statistics Service (NASS), United States Department of Agriculture (USDA), “United States: Summary and State Data, Volume 1” 2007 Census of Agriculture , Issued February 2009. 20National Agricultural Statistics Service (NASS), United States Department of Agriculture (USDA), “United States: Summary and State Data, Volume 1” 2002 Census of Agriculture , Issued June 2004. 21 Florida Agricultural Statistic Service (FASS), National Agricultural Statistic s Service (NASS), United States Department of Agriculture (USDA), “Citrus Summary 2006
- 07,” February 2008.10

packinghouses is $6.5 million or less in annual receipts. InFlorida, there were at least 142 packinghouses registered in 2007. 22 While the classification of these establishments by sales volume is not available, it is estimated that approximately 35 of the 142 registered packinghouses are large commercial citrus packinghouses with the remainder being small establishments known as gift packers in Florida. The Fresh Shippers Report, issued by Florida’s Citrus Administrative Commi ttee, details quantities of fresh citrus shipments of the top 35 to 50 shippers of each season. 23 At least 95 percent of Florida fresh citrus shipments are packed by the top 35 to 50 packinghouses in the State. 24 During the 2010
- 11 citrus season, annual s ales for at least 21 of the top 35 shippers (60 percent) were below the SBA size standard of $6.5 million. It is estimated that at least 85 percent of Florida’s citrus packers, including small gift packers, would be considered small according to the SBA s ize standard. In 20 10 , there were 74 packinghouses in California. 25 Traditionall y, a pproximately

60 percent of these packinghouses market the final product through such cooperatives as Sunkist Growers, Inc
. , the Central California Orange Growers Cooperativ e, and DNE World Fruit Sales. 26 The remaining packinghouses market their final product independently . We do not have a definitive number of small
- entity packinghouses that may

be affected b y this rule, and welcome public comment on their number and size, and how they may be affected.

22 Florida Department of Agriculture and Consumer Services, Division of Fruit & Vegetable Inspection. <http://www.doacs.state.fl.us/fruits> 23 “F resh Shippers Report: 2010
- 11 Season Through July 31, 2011,” Citrus Administrative Committee, August 19, 2011. <http://www.citrusadministrativecommittee.org/> 24 Ibid. 25 California Citrus Mutual Report to the CDFA Board

- June 30, 2010. Bob Blakely, Direc tor of Industry Relations. < http://www.californiacitrusmutual.com/pdf/CDFA_Board_Report_6302010.pdf > Date accessed: September 9, 2011. 26 United States International Trade Commission (USITC), “Conditions of Competition for Certain Oranges and Lemons in the U.S. Fresh Market, Inv 332
- 469,” Publication 3863, Washington, D.C., July 2006.11

Depending on the substitutability of oranges, lemon s , mandarin s and citrus hy brid imports from Uruguay for U.S.
- grown varieties, U.S. entities could be affected by the proposed rule
. As indicated, the majority of producers th at could be affected are small entities . However, even if all imports from Uruguay were to directly replace consumption of U.S.
- grown citrus varieties in the continental United States, the effect on U.S. producers would be relativel y minor. Under such a scenario, imports of fresh citrus from Uruguay would displace less than 3 percent of fresh citrus varieties produced b y U.S. operations in 2009
- 10. Potential displacement is even less likely when factoring in Uruguay ’s exports to established markets in Europe and Russia. We emphasize that even a small impact for U.S. producers such as this is highl y unlikely. We expect that any

product displacement that may occur because of the proposed rule would be largel y borne b y other foreign suppliers of fresh citru s, such as Chile , given the sizable amounts of lemons and mandarins, for example, imported by the United States and the fact that the time of y ear that citrus is produced in Uruguay is the same as that for current South American sources
. We welcome public comment that would improve our understanding of possible effects of the proposed rule for U.S. small entities. **Projected Reporting, Recordkeeping, and Other**  **Compliance Requirement**  **s** Reporting and recordkeeping requirements associated with the proposed rule are discussed in the rule under the heading "Paperwork Reduction Act." **Duplication, Overlap ,**  **or Conflict with Existing Rules and Regulations**  APHI S has not identified any duplication, overlap, or conflict of the proposed rule with other Federal rules.12

**Alte rnatives to**  **minimize Significant Economic Impacts of the Rule**  Based on our review of available information, APHI S does not expect the proposed rule to have a significant economic impact on small entities. We have prepared this initial regulatory flexibili ty anal ys is because our understanding of possible economic effects of the rule on small entities is incomplete. In the absence of apparent significant economic impacts, we have not identified alternatives that would minimize such impacts.